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Under special housing legislation 25 per cent of the homes would be priced under $350,000, 25 per cent would cost between $350,000 to $400,000 and the remainder more than $400,000.

Western Bay mayor Garry Webber said it was a great step forward for Omokoroa.

It was expected the first showhome would be up and running by mid-2017, and the first liveable home by September or October next year.

The Special Housing Area in Omokoroa was officially launched with a ribbon cutting, speeches and blessing. When completed it would have 240 affordable homes available for purchase.

Residents would have some conditions to cover off to buy a special housing area home - many would be first home buyers and must live in the property.

Three properties near Settlers Hall made up the special housing area, purchased by district council in 2000, 2007 and 2016.

Mr Webber said the joint venture with Classic Group would ensure council had continuous input and oversight from the beginning of the development through to the final house.

The houses would be relatively small, built on compact sections in the initial stages.

Bay of Plenty National MP Todd Muller said the special housing project was fantastic for the area.

"The growth in the area is pretty significant and it's great that the council, through the framework provided by the Government, and developer Peter Cooney of Classic Builders, have come up with a housing solution at the more affordable end."

Mr Cooney said Classic Builders were strong advocates for more affordable housing and said he only wished more councils around the country would do the same thing as Western Bay.